Question for Discussion: How can we create a Democratic Global Capitalism?

Readings:; Schwenninger, "Democratizing Capital"; Hertz, "The Death of Gucci Capitalism"; Dowd, "Virtuous Banks, Really"; Stiglitz, Government Of the 1%,
by the 1%, for the 1%; Stiglitz, The Book of Jobs (2012)


Videos: DVD: Financial Meltdown 2008--IMF Advisor MF Advisor on Financial Oligarchs (5:00) , Robert Johnson on Zombie Banks ;
DVD: Wall Street vs. Main Street--Warren on the Big Banks;
DVD: Financial Meltdown (Criminal Wall Street--William Black)
DVD: Inside Job: 137 (minutes);
You Tube: Gordon Gekko - "I create nothing, I own."
You Tube: Gordon Gekko speaks the truth about the bailout.

Alternative to Economic Globalization

• How to Prevent the Next Wall Street Crisis
• LTCM: It's a Short-Term Memory
• Finance before the Next Meltdown
• Greenspan Recants
• The Pillage People
• Posner, A Failure of Capitalism
• Krugman, The Madoff Economy
• The End of the Financial World as we Know It
• Krugman, Reagan Did It
• Reckless, part 1
• Reckless, part 2
• Saftey Nets for the Rich
• Johnson, Who Caused the Crisis
• Prins, Its Takes a Pillage
• Obama Speech to Wall Street
• The Death of Rational Man
• Johnson, The Next Financial Crisis
• A New Financial Foundation
• To Each According to his Greed
• Who will Rein in Wall Street
• Bill for Tarp could be Huge
• What else could our Bailout have Bought
• Why there was no depression
• What went wrong with Economics
• Krugman, What went wrong with Ecconomis
• Geitner and Wall Street
• Global Financial Crisis 2008
• All Fall Down
• The End of Wall Street's Boom
• Brown, All Together Now
• Krugman, Averting the Worse
• Feds Plans to Police Banks
• Krugman, Boiling the Frogs
• Spitzer, Break the Banks
• Bailout the Bailouts
• Capitalism the Remix
• If an Economists Fall in a Forest
• Changing the World
• Is American Dream dead
• Is the Conservative Era Over
• The Decline of the Middle Class
• Dumb Money Chapte 1
• Economists for an Imaginary World
• Government has a hand in the Economy
• Everyman's Depression
• FDR's lessons for Obama
• The Fed Ignored Evidencce
• The Roof Caved In
• Finding a Gatekeeper in the World of Finance
• Goldman Sachs a Welfare Queen
• Keynes can't Help Us Now
• Krugman, The Widening Gyre
• Hutton, Krugman's Fear for a Lost Decade
• Hightower, Madoff is not the Problem
• Gorbechez, We had our Perestroika
• Posner ?, The Myth of the Rational Market
• Reich, No downturn for Greed
• Gross, The Rich War on the Rich
• Lind, RX for the Economy
• Summers and Wall Street
• Reich, Why Wall Street Reform is STuck in Reverse
• The Big Bang of Bailouts
• The Lehrman Shock
• The Real AIG Scandal
• Spitzer, The Regulatory Charade
• Lind, The Social Fabric is Snapping
• Johnson, US Inequality during the Recovery Period
• Meyerson, Wall Street's Just Desert
• Brooks, We Need a Bailout Too
• Chait, Wealthcare
• Rothkoff, Where are the Leaders
• Rich Income in 2006
• Reckless Part One
• Reckless Part Two

• ---

Understanding the Lessons of the 2008 Finacial Collapse

• Stiglitz, Government Of the 1%, by the 1%, for the 1% (2011):
  
  The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent
  
  But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free
  ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed.
  
  
• Richest 1 Percent Account for Nearly all of Economy's Gains
  
  
• Income Inequality Worse Under Obama Than George W. Bush
  
  
• Share of the Nation’s Income Earned by the Top 1 Percent
  
  
• Kroll, The New American Oligarchy:
  

  That story begins in the late 1970s and continues through the Obama years, a period in which American policy has been so skewed toward the rich that we're now living through the worst period of income inequality in modern history. Consider the statistics: 50 years ago, the wealthiest 1% of Americans accounted for one of every 10 dollars of the nation's income; today, it's nearly one in every four. Between 1979 and 2006, the average post-tax household income (including benefits) of the wealthiest 1% increased by 256%; the poorest households saw an increase of 11%; middle class homes, 21%, much of which was due to the arrival of two-job families.

  
  
• So what is the size of your piece of pie? How do we move up to get a larger slice? According to a working paper by Edward Wolff , the top 5% of U.S. households control 62% of all net worth. In fact, the top 20% of households control 85% of all net worth. This leaves the remaining 80% of all households to fight for the 15% of left over pie. Not much of a piece. So what are households to do?
  
  
• Reich, "Why Wall Sreet Reform is Stuck in Reverse":
  
  Official Wall Street PAC donations are piddling compared to the tens of millions of dollars that Wall Street executives dole out to candidates on their own (or with a gentle nudge from their firms). Remember -- the Street is where the money is. Executives and traders on the Street have become the single biggest sources of money for Democrats as well as Republicans. And with mid-term elections looming next year, you can bet every member of Congress has a glint in his or her eye directed at the Street.
  
  
• Scheer, "Government, of, by, and for the One Percent":
  
  Even though most Americans accept that the political game is rigged, we have long assumed that the choices we make in the economic sphere as to career and home are matters that respond to our wisdom and will. But the banking tsunami that wiped out so many jobs and so much homeownership has demonstrated that most Americans have no real control over any of that, and while they suffer, the corporate rich reward themselves in direct proportion to the amount of suffering they have caused.
  
  My book on the banking meltdown, "The Great American Stickup," begins with the following words. "They did it. Yes, there is a ‘they': the captains of finance, their lobbyists and allies among leading politicians of both parties, who together destroyed an American regulatory system that had been functioning splendidly."

  They got to rewrite the laws to enable their massive greed over everything from the tax codes to the sale of toxic derivatives over the past quarter century, smashing the American middle class and with it the nation's experiment in democracy.
• Stiglitz, The Book of Jobs (2012):
  
  What’s needed is to get banks out of the dangerous business of speculating and back into the boring business of lending. But we have not fixed the financial system. Rather, we have poured money into the banks, without restrictions, without conditions, and without a vision of the kind of banking system we want and need. We have, in a phrase, confused ends with means. A banking system is supposed to servesociety, not the other way around.
  
  
  
• Plutonomy Definition:
  
  Economic growth that is powered and consumed by the wealthiest upper class of society. Plutonomy refers to a society where the majority of the wealth is controlled by an ever-shrinking minority; as such, the economic growth of that society becomes dependent on the fortunes of that same wealthy minority.  
  
  
• Plutonomy, Part 1: 2006 Citigroup Report:
  
  
• Plutonomy, Part 2 -- The Rich getting Richer: 2006 Citigroup Report:
  
  
• Plutocracy Now: It's the Inequality Stupid
  (Great Graphs on Increasing Inequality)
  
  
• Simon Johnson, The Quiet Coup

  The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

• Excessive Leverage Helped Cause the Great Depression
  and the2008 Financial Collapse
  
  The Securities and Exchange Commission can blame itself for the current crisis. That is the allegation being made by a former SEC official, Lee Pickard, who says a rule change in 2004 led to the failure of Lehman Brothers, Bear Stearns, and Merrill Lynch.

  The SEC allowed five firms — the three that have collapsed plus Goldman Sachs and Morgan Stanley — to more than double the leverage they were allowed to keep on their balance sheets and remove discounts that had been applied to the assets they had been required to keep to protect them from defaults.

• In 2004, SEC waived its leverage rules. Previously, broker-dealer net capital rules limited firms to a maximum debt-to-net capital ratio of 12 to 1. This 2004 exemption allowed them to exceed this leverage rule. Only five firms -- Goldman Sachs, Merrill Lynch,
  Lehman Brothers, Bear Stearns, Morgan Stanley -- were granted an exemption; they promptly leveraged up 20, 30; and even 40 to 1.
  
  
• Mark-to-Market Leverage - SHADOW BANKING:
  (See Bank Leverage Chart)
  
  The most significant problem that arose during the financial crisis of 2008 was the increasingly high leverage ratios of investment firms throughout the global financial system.
  
  When the capital was freed up following the 2004 SEC Rule change, many investment banks began to increase the amount of debt instruments that they were issuing.  This resulted in increased leverage ratios for the investment banks.  Leverage ratios allows for potential higher profits, but they also present higher risks of default when crises occur. 
  
  
• Leverage Ratios for Major Investment Banks
  
  
• Leverage Ratios of Top Tier International Banks: Hope or Gloom
  (See Bank Leverage Chart)
  
  
• Financial Giants Turning Into 'Zombie Banks'The top U.S. financial institutions have become zombie banks that will need a decade to adjust their businesses to the new realities in the industry, analyst Meredith Whitney told CNBC.
  
  In banking parlance, zombies have little net worth but are backed by the government and continue to meet their obligations.
  
  
• The zombie banks are back - CNN Money
  
  
• Johnson, Financial Crisis for Beginners
  
  
• Economist: US collapse driven by 'fraud';
  Geithner covering up bank insolvency:
  
  That financial calamity, he explained, was brought about not by mishap or accident, but only after a concerted effort to undermine and remove all regulations, allowing a creditor free-for-all that hinged on fraudulent risk ratings for bad loans.
  
  He equated the entire US financial system to a giant "ponzi scheme" and charged Treasury Secretary Timothy Geithner, like Secretary Henry Paulson before him, of "covering up" the truth.
  
  "Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?" asked Moyers.
  
  "Absolutely, because they are scared to death," he said. "All right? They're scared to death of a collapse. They're afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we'll run screaming to the exits. And we won't rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it's foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, 'We just can't let the big banks fail.' That's wrong.
  
  
  
• Does the Financial Collapse Prove our Financial System isn't Working?
  
  
• Lewis: What are the Large Causes of the 2008 Financial Collapse
  
  
• Lewis: What are the Larger Lesons we can Learn
  from the 2008 Financial Collapse
  
  
• Total Financial Losses in the 2008 Financial Collapse
  (See Page two)
  
  
• Financial Profits Graph 1948-2008
  
  
• GAO Audit of Federal Reserve Bailout of Banks (2011)
  (Bailout cost over $16 Trillion Dollars)
  
  
• Sanders, The Fed Audit (2011):
  
  

  "As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world," said Sanders. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else."

  Among the investigation's key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. "No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president," Sanders said.
  
  

• The Real Size of the Bailout
  (See this Chart)
  
  
• What Else Could 14 Trillion Buy?
  (See this Chart)
  
  
• Banking Collapse of 2008 : Three weeks that changed the world ...
  
  
• Greenspan Concedes Error on Regulation - NYTimes.com
  
  
• Greenspan and the Wisdom of Markets
  (See page 3 on the failure of Market Fundamentalism)
  
  
• Greenspan admits he made a mistake - YouTube
  (See 30 sec ---)
  
  
• Gross, "Dumb Money"
  (Chapter summary of Failed Assumptions of Market
  Fundamentalism)
  
  
• Law Changes that Led to the Financial Collapse
  
  
• 10 Years Later, Looking at Repeal of Glass-Steagall - NYTimes.com
  
  
• Ritzholtz, The Big Lie :
  (What Really caused the Financial crisis: See 10 points)
  
  
• Johnson, Who Caused the Economic Crisis"
  (Look at argument over Bank Fraud):
  
  So what are these three criminal storylines? The first, and the smallest (if you can believe it) at approximately $10 trillion, is the housing crash and the mortgage meltdown. Totally criminal, as its primary cause was banksters stuffing worthless mortgage paper into CDOs [securities known as collateralized debt obligations] and calling them AAA. Criminal at every level, as real estate agents were convincing their buyers to pay more, not less, to "earn" their fees through a winning bid, appraisers were offering non-independent and completely tainted appraisals, mortgage brokers were altering loan documents and changing income data to qualify buyers, bankers were paying rating agencies to call junk paper AAA, and principal investors like pension funds, insurance companies, and sovereign governments failed to perform even the minimum levels of due diligence demanded by their fiduciary duties
  
  
  
• Uncle Sam, the Enabler: How Wall Street
  screwed Main Street: A Memo from the top
  (Look at list of Changes that cause the Financial Crisis}
  
  
• Financial reform law: What's in it and how does it work
  
  
• How financial reform will really work - Aug. 23, 2010
  
  
• Financial Reform Passes, But What Does That Mean?
  
  
• Democrats revive financial transaction tax idea | Reuters
  
  
• G20 fails to endorse financial transaction tax | Reuters
  
  
• Leopold, Financial Disaster Insurance:
  
  According to historian Niall Ferguson, "Every day two trillion
  dollars change hands on foreign exchange markets, every month seven trillion dollars chanee hands on global stock markets ." He also calculates there about $3 trillion in CDOs" out there and that the estimated value of credit default swaps "was just under $600 trillion.'" By my back-of-the-envelope calculations, I estimate that the global casino sees about $900 trillion worth o ftansactions each year, plus or minus a few hundred trillion. If we"collecte a 3-basls point insurance premium {three one-hundredths of 1 percent or less than 1/3 of a penny per dollar} on the face value of each and every transaction, we could collect about $2.7 trillion " per year in total global premiums. I suspect the U.S. share would be at least $500 billion per year, year in and year out.'
  
  

Does the Financial Collapse prove that our Financial System isn't Working?

• Wall Street's Crackdown on Fraud (2012)
  --People fined for fraud during financial crisis
  
  
• The Real Costs of the 2008 Financial Bailout
  
  
• Taibbi, Finally, a Judge Stands up to Wall Street:
  
  

  So to recap: a unit of Citigroup, having repeatedly violated the same laws and having repeatedly violated the SEC’s own cease-and-desist orders and injunctions, is dragged into court one more time for committing a massive fraud.

  And what does the SEC do? It doesn’t even bring up Citi’s history of ignoring the SEC’s own order, slaps the bank with a fractional fine, refuses to target any individuals, allows the bank to walk away without an admission of wrongdoing, and puts a cherry on the top by describing the $160 million heist not as a crime, but as unintentional negligence.

  
  
• Taibbi, Wall Street Banksters Get Bailouts, No Jail Time
  
  
• Are the SEC and Citigroup Deceiving a Federal Judge?
  (Use as strong example of Banks being above the law)
  
  
• Judge Blocks Citigroup Settlement
  
  
• Judge Tosses Citigroup Settlement
  
  
• Coates, Bank Power Trumping Democratic Power
  
  
• Petrella, Rewarding the Rich, Regulating the Rest
  
  
• Reich, Elites and First Amendment Rights
  
  
• Leopold, Elites Destroying Democracy
  
  
• Hazen, The People are not being Represented by Washington
  
  
• Shiller, A Failure to Control the Animal Spirits
  
  
• Government bailouts of the Financial Markets 1982-2008
  
  
• The Problem is that the Federal Government has
  bailed out Wall Street because it is that Finance
  is at the center of a healthy economy
  
  
• The FIRE sector of Wall Street is doing really well
  but the real economy of Main Street is hurting. By 2008, Finance was 31 percent of the wealth created every year in our GDP.
  
  
• Money creating money on Wall Street through the inflation of asset bubbles (stocks, housing, bonds, securities, or derivatives) does not help the real economy of Main Street
  
  
• The real economy of Main Street involves companies hiring workers, producing goods and services, and creating wealth for real communities. If Main Street doesn't work, then our economy doesn't work.
  
  
• Is it possible that we owe our foreign creditors so much money, and depend on their continuing to loan money to us, that we can't break up the Banks and reform the financial system without really hurting our Arab, Chinese, and Japanese creditors? If so, then Friedman is right: The Electronic Herd is really calling the shots. This would represent the end of any pretense at democracy in the United States. Friedman would we right that our politics is just Pepsi or Coke with no other alternative choices. This is what Friedman means by TINA:
  There is No Alternative.
  
  
• Reich, "Why Wall Sreet Reform is Stuck in Reverse"
  
  
• Spitzer, "The Regulatory Charade"
  
  
• Wall Street (1987)
  
  
• You Tube: Gordon Gekko - "I create nothing, I own."
  
  
• Wall Street: Money Never Sleeps (2010)
  
  
• You Tube: Gordon Gekko speaks the truth about the bailout.
  
  
• Klein, Is Obama Really a Populist?
  
  
• Bailout Recipients spent Millions on Lobbying
  
  
• Banks screwed the Government and Taxpayers
  
  
• TPMDC | Talking Points Memo | The Influence Your Money Can Buy ...
  
  
• Post-Bailout Lobbying by the Biggest Banks
  
  
• G20 finance ministers agree to maintain fiscal support‎
  
  
• Gordon Brown: A Clear Agenda for Reform in 2010
  
  
• Dudley, Regulatory Reform of the Global Financial System
  
  
•   How to reform the international financial system? :
  A Chinese Perspective
  
  
• Hertz, "The Death of Gucci Capitalism"
  
  
• Naomi Klein: Wall St . Crisis Should Be for Neoliberalism
  What Fall of Berlin Wall was for Communism
  
  
• Moral Bankruptcy: Why are we letting Wall Street
  Off So Easilty?
  
  
• How Big Finance Bought Uncle Sam
  
  
• Financial Industry Contributions to Political Parties
  
  
• Letting the Banks Off Easily
  
  
• Thank You, Wall Street. May We Have Another?
  
  
• SEC allows Banks to Commit Fraud Again and Again
  
  
• Scheer, Banks are Allowed to Commit Fraud Again and Again
  
  
• Taibbi, the Next Big Bank Bailout
  
  
• Prins, How Big Banks Fleece You - The Daily Beast
  
  
• Break Up the Big Banks? - Richard A. Posner - Business
  
  
• Dowd, "Virtuous Banks, Really"
  
  
• How might the current financial crisis shape financial sector
  (html version with graphs)
  
  
• How might the current financial crisis shape financial sector
  (pdf version)
  
  
• Naomi Klein: Wall St . Crisis Should Be for Neoliberalism
  What Fall of Berlin Wall was for Communism
  
  
• Alperovitz, Taking the Offensive on Wealth
  
  
• Stiglitz, "How to Prevent the Next Wall Street Crisis"
  
  

We Are in a Depression

• Posner, "We are in a Depression"
  
  
• Baker, "Barack Hoover Obama"
  
  
• Daily Kos: Brief survey of Obama/Hoover comparisons
  
  
• An Economic Bill of Rights
  
  
• Roosevelt's Economic Bill of Rights
  
  
• FDR's Economic Bill of Rights - YouTube
  
  
• Korten, Wall Street Markets vs. Main Street Markets
  
  
• Brooks, "We Need a Bailout Too"
  
  
• LInd, "That Sound your Hear is the Social Fabric about to Snap"
  
  
• What Else could our Bailout Buy
• Schwenninger, "Democratizing Capital"
  
  
• Vanden Heuvel and Schlosser, "America Needs a New New Deal"
  
  
• Chris Lewis, What about a Green New Deal?
  
  
• Andersen, Ending Plutocracy: A 12 Step Program
  
  
• Schwenninger, "Democratizing Capital"
  
  
• Hirsh: Why We Should Break Up the Big Banks | Newsweek Voices
  
  
• Robert Reich: Breaking Up the Big Banks, and
  Why Congress Won't Do It
  
  
• Leonard, The Break Up the Banks Delusion
  
  
• Leonard, Boom and Gloom
  
  
• Lewis, The End of the Financial World as We Know It
  
  
• Lewis, How to Fix a Broken System
  
  
• RGE - New recommendations to solve our financial crisis (pdf)
  
  
• RGE - New recommendations to solve our financial crisis (html)
  
  
• Korten is right. We have the power and chance to reform this Money monster that Wall Street has become. The danger is that we won't be able to do it because of the influence of Big Money in Politics
  
  
  
• Korten,"12 Point New Economy Agenda"
  
  
• Korten: Summary of Political and Economic Reforms